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A mortgage is a form of security interest, commonly arising over immovable property. In essence, a mortgage is simply a secured loan contract.

It is relevant to property law because the security interest actually confers a proprietary rights upon the lender i.e. the mortgagee in the secured property which is enforceable against the borrower i. e. the mortgagor where the terms of the loan contract are breached and the lender must enforce his security interest. Mortgages are one of the most common forms of security interests in existence. Most of the people contemplating the purchase of a piece of property do so with the assistance of a loan, which is secured by a mortgage. It is important to appreciate exactly what type of interest is transferred to the mortgagee upon executing the mortgage. A security interest will be proprietary in nature where it confers upon the mortgagee in rem rights which are enforceable against a specific and identifiable piece of property. The mortgagee actually holds a proprietary interest in the property which is capable of being alienated; however this right cannot be realized until it is clear that the mortgagor is in default of the primary obligation; the

interest is only security. HOW DOES ENGLISH MORTGAGE PROMOTE HOME OWNERSHIP ? 58(e) English mortgage. Where the mortgagor binds himself to repay the

mortgage-money on a certain date, and transfers the mortgaged property absolutely to the mortgagee, but subject to a proviso that he will re-transfer it to the mortgagor upon payment of the mortgage-money as agreed, the transaction is called an English mortgage. Essential features of an English Mortgage: The mortgagor transfers the property absolutely to the mortgagee. The mortgagor binds himself to repay the borrowed money before a certain date. Such transfer is subject to the condition that the mortgagee will retransfer the property on repayment of the loan. Sicom Limited A Company v. Union Of India Kusum Ispat and Wire Products Limited had taken loan which was secured by a mortgage. The aforesaid Company defaulted in paying the amounts. The mortgagees took possession of the mortgaged property and sold it and realised a net sum of Rs. 2,05,00,000/-. The said amounts were appropriated by both the mortgagees in partial discharge of their debts. According to the

petitioner even after appropriation of the said amount, monies are still due and payable. It is submitted that in the instant case what the Company had created in favour of the mortgaees is an English Mortgage. An English Mortgage it is submitted transfers title in favour of the mortgagee with only liberty of redemption in favour of the mortgagor. The court proceeded on the assumption that the mortgage is an English Mortgage. Section 58(e) of the Transfer of Property Act reads as under: 58(e) English mortgage. --Where the mortgagor binds himself to repay the mortgage-money on a certain date, and transfers the mortgaged property absolutely to the mortgagee, but subject to a proviso that he will re-transfer it to the mortgagor upon payment of the mortgage-money as agreed, the transaction is called an English

mortgage. Relying on this provision the learned Counsel seeks to contend that when an English mortgage is created, the property is transferred in favour of the mortgagee. The only right that the mortgagor retains is for redemption of mortgage. Therefore, on the date when the mortgage was created it will be the mortgagee who is entitled to the title as transferee of the property and consequently it ceases to be the property of the mortgagor. The nature of the right created by a mortgage (English Mortgage) had come up for consideration before the Privy Council in Ram Kinkar Banerjee and Ors. v. Satya Charan Srimani and Ors. That was a case of an English Mortgage. The issue was whether Section 58(e) upon its true construction amounts to an absolute transfer of the property. The Privy Council considered the nature of the English Mortgage under the English Law and under Indian Law and held the Section speaks of the mortgagor transferring the mortgaged property absolutely to the mortgagee, In using those words does it mean that no interest or no legal interest in the property remains in the mortgagor? If the sub section stopped at the word mortgagee it might be necessary put this construction upon it, but it does not stop there: it adds the proviso that the mortgagee will retransfer the property; upon payment of the mortgage money as agreed. Their Lordships think that with this addition the sub-section upon its true construction does not declare an English mortgage: to be an absolute transfer of the property. It declares only that such a mortgage would be absolute were it not for the proviso for retransfer. It does not determine what legal effect follows from the use a particular form of words; it merely prescribes the form of words necessary to constitute what is known in India as an English mortgage. Section 58(e) deals with form, not substance. The substantial rights are dealt with in Ss.58(a) and 60. Whatever form is used nothing more than an interest is transferred and that interest is subject to the right of redemption.

Effects of English Mortgage on Home Ownership: In English mortgage, the property is absolutely transferred to the mortgagee as security. Security transactions provide a lender an additional sense of protection against the possibility of a borrower being unable to repay the borrowed amount. A lender holding nothing but an enforceable personal obligation against the borrower can be in a precarious situation because of the possibility that, where a default occurs, the borrower may become bankrupt or simply be unable to repay the amount borrowed. The advantage of absolute transfer is that it places the lender in a much stronger position, the lender holds an actual interest in the secured property, which is capable of being realized in circumstances where the borrower is in default and the debt is incapable being discharged by the borrower personally. Absolute transfer of property as security in English mortgage serves the purpose of the security interest i.e. it operates for a limited period of time as a protective device; where the terms of the primary debts a re satisfied, there will no longer be any need for the security interest and the mortgagor may redeem the secured property. An important consequence resulting from the creation of an English mortgage is the validity of the power of extra judicial sale in certain circumstances. Section 69 of the Transfer of Property Act, 1882 is one of the rare instances and is an exception to the general rule of law. Under this section a person, who is not the owner of the property, could convey the right, title and interest of a third party- mortgagor in the mortgaged property even without the intervention of the court. In default of money repayment a mortgagee has the right to sell the mortgaged property without the intervention of the Court. Whereas, in case of mortgage by de posit of title deeds a mortgagee cannot sell the property without the intervention of court. The bright feature of English Mortgage is that it saves time and money as well. The mortgagee has to be extra cautious in case of Deposit of title deeds. In no case he should part with the title deeds. In case the mortgagee hands over the possession of document to the mortgagor, a subsequent mortgagee who has in good faith accepted the document will have a prior claim. It means there are more chances of committing fraud in case of deposit of title deeds in comparison to the English mortgage.

In English Mortgage the mortgagor has personal liability also. If the mortgagee is unable to recover the mortgage money from the mortgage security in case of default in payment, he can recover it from him personally, whereas, in the mortgage of the deposit of title deeds there is no personal liability.

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